PROFITABLE FARMING - BUILDING ON OUR CLEAN, GREEN, SAFE IMAGE

I begin my contribution with a confession. My love of agricultural policy came late in life.

For a long time other portfolio responsibilities kept me somewhat occupied - treasury, defence, small business and resources to name just a few.

Having said that, as an MP representing a rural electorate, I’ve always had a keen interest in agriculture and after 19 years in the Parliament, I’ve seen plenty of change, reform and challenges in the sector.

But it was not until my appointment as Agriculture Minister in 2013 that I began to develop my passion for the sector. I asked Kevin Rudd for the portfolio because I recognised its importance and I knew I’d enjoy it. I have no regrets. It has captured my imagination and why would it not?

No area of our economy, I submit, is more important to our future well-being than that which produces our food and indeed, sustains so many others around the globe.No sector has so much opportunity on offer, and no sector faces so many challenges in fully capitalising on those opportunities.

Reaping the full benefits of the Dining Boom will require plenty of strategic planning and intellectual grunt.

The work, leadership and coordinating efforts of peak industry bodies like WA Farmers will be critical to our success and I thank you all for your efforts.

But much of the guidance needs to come from partnerships across industry organisations and governments.

I’m determined that - whoever is in charge in Canberra - the right decisions are made, and the right policy settings are put in place to achieve what I hope, are common objectives across the political divide.

While the challenges we face are wide and varied, six issues stand out:• We need to understand that our future will be more about high returns - about competing in higher priced/higher margin markets rather than just about volume;• We need to properly allocate our resources and place them on a sustainable footing;• Our capacity to attract foreign capital will be critical as will be our monitoring of price transfer and similar issues;• On the biosecurity front, we must leave nothing to chance;• Our research and development and extension efforts must be world’s best; and• We must be mindful that agriculture’s future in Australia will largely be determined by the quality of its leaders and workforce.

This in itself is an important point. We need continued productivity gains but with a stronger emphasis on profitability. So where do we go from here?

Throughout the 30 years to the beginning of this decade, most of our productivity gains came from our capacity to produce more with less your skills and efforts.

This was a largely successful strategy except that while we greatly increased the volume of production and world trade increased dramatically, profitability actually declined.

There is more we can do on the cost front – infrastructure, transport, reducing red-tape, better management, and skilled labour being the stand-outs.

But future gains in profitability will increasingly come from our capacity to authenticate, verify, consolidate and sustain our clean, green and safe image. Along with animal welfare assurance, these are the areas which will deliver our capacity to secure premium prices for our products. In the future, it will all be about brand and reputation.

We certainly don’t lack evidence that high wealth consumers – both here and in Asia – are willing to pay a premium for goods grown in an environmentally sustainable way, and with animal welfare issues in mind.

Here in Australia, “organically grown” carrots and “free range” eggs spring to mind. In China, the high prices recently paid for our dairy products make the case.

On the sustainability front, it is obvious that our long-term prospects will be determined by our climate, the availability of water, and the on-going quality and productive capacity of our soils.

This is a reality which will increasingly weigh on the minds of our younger farmers.

I recently had cause to read the latest ABARES report on agriculture productivity. There was one constant and reoccurring theme – our changing climate.

Our farmers know the climate is changing. While there may still be debate about the causes, there is no doubt our continent is growing hotter and drier.

So we should strive to quickly find a political settlement on carbon mitigation and get on with the challenge which most interests me – adaptation and the application of continuous improvement management systems.

That will be a good thing for profitability, a good thing for resource management, and a good thing for marketing because if well designed, these systems will verify our clean and green credentials.

Together they will bring more efficient use of scarce water supplies, healthier soils, less fertiliser costs, carbon income, and certify our clean, green safe image.

Both adaptation and environment management systems – EMS - have been with us for some time. Landcare is now 25 years old and the first COAG agreed framework for an environmental management system in agriculture was struck in 2002.

But we are at risk of dropping the ball - EMS seems to have lost political favour and adaptation is at best, in a state of flux.

On the latter, recent programs including Caring for Country and Carbon Futures offered real and meaningful incentives. But there is much to learn from those programs.

I am sure we can do it better particularly by rewarding land managers who do the right thing. It remains to be seen whether the current Government’s alternate approach will produce results.

Environmental Management Systems have been left to the limited number of groups and farmers racing ahead of public policy, often guided by non-government initiatives like Certified Land Management or CLM.

Those who believe we can meet with success without a greater commitment to adaption and the adoption of better management and certification systems are not yet facing reality.

Not only are consumers - here and abroad - voting with their feet, so too are investors.

The Australian Financial Review recently reminded us of the rise and rise of so-called “ethical investment”. Fund managers for example, are becoming more discerning about where they put their money. Top amongst the unfashionable are the fossil fuel, nuclear and tobacco sectors.

But agriculture will not be immune. Like consumers, investors will continue to show preference for environmentally friendly products and those who respect the welfare of animals. Whether we like it or not, it is true and we need to prepare for more of it.

Some of you will be familiar with the ANZ Bank – Port Jackson Partners report entitled “Greener Pastures”. Amongst other things it suggested that to fully capitalise on the opportunities posed by growing global food demand, we would need $500 billion in infrastructure investment between now and 2050.

Given our population and capacity for savings much of that investment by definition, must come from foreign sources. Domestically that reality has generated a degree of community concern and I respect those reservations.

But rather than put in place more barriers to investment, we need to find better ways of building public confidence.

The real problem is not who or what goes to the Foreign Investment Review Board. Rather, that no one knows what the FIRB is or what national interest test it applies.

It’s all too opaque.

Rather than set varying and arbitrary thresholds based on country of origin which only serve to create road-blocks to investment, maybe it's time to more clearly articulate our expectations.

For example, I'm keen for a conversation about creating a link between foreign investment and environmental outcomes. Does the investment proposal include a commitment to credible environmental management plan - a plan to improve water efficiency and soil quality? Indeed, the commitment to animal welfare standards consumers are now demanding?

This need not be a regulatory burden. Some sectors including dairy are well advanced in the development of their own sustainability plans. In this case, a formal commitment to the industry-wide system may suffice.

This in turn would encourage the development and adoption of more commodity-wide systems - at least amongst those welcoming of much needed foreign capital - and make us more attractive to investors who place an emphasis on ethics.

All of these thoughts are challenging and for some, may be confronting. But it’s a good time to be thinking outside the square and a good time to be challenging you, #GenerationAg, tomorrow’s agriculture and agri-business leaders, to do just that.